02728cam a22002777 4500001000700000003000500007005001700012008004100029100002700070245015200097260006600249490004200315500001500357520143200372530006101804538007201865538003601937690009401973690014102067700002502208700002302233710004202256830007702298856003802375856003702413w14180NBER20180319082233.0180319s2008 mau||||fs|||| 000 0 eng d1 aLjungqvist, Alexander.14aThe Investment Behavior of Buyout Fundsh[electronic resource]:bTheory and Evidence /cAlexander Ljungqvist, Matthew Richardson, Daniel Wolfenzon. aCambridge, Mass.bNational Bureau of Economic Researchc2008.1 aNBER working paper seriesvno. w14180 aJuly 2008.3 aThis paper analyzes the determinants of buyout funds' investment decisions. In a model in which the supply of capital is "sticky" in the short run, we link the timing of funds' investment decisions, their risk-taking behavior, and the returns they subsequently earn on their buyouts to changes in the demand for private equity, conditions in the credit market, and funds' ability to influence their perceived talent in the market. Using a proprietary dataset of 207 buyout funds that invested in 2,274 buyout targets over the last two decades, we then investigate the implications of the model. Our dataset contains precisely dated cash inflows and outflows in every portfolio company, links every buyout target to an identifiable buyout fund, and is free from reporting and survivor biases. Thus, we are able to characterize every buyout fund's precise investment choices. Our empirical findings are consistent with the model. First, established funds accelerate their investment flows and earn higher returns when investment opportunities improve, competition for deal flow eases, and credit market conditions loosen. Second, the investment behavior of first-time funds is less sensitive to market conditions. Third, younger funds invest in riskier buyouts, in an effort to establish a track record. Fourth, following periods of good performance, funds become more conservative, and this effect is stronger for younger funds. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aG11 - Portfolio Choice • Investment Decisions2Journal of Economic Literature class. 7aG23 - Non-bank Financial Institutions • Financial Instruments • Institutional Investors2Journal of Economic Literature class.1 aRichardson, Matthew.1 aWolfenzon, Daniel.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w14180.4 uhttp://www.nber.org/papers/w1418041uhttp://dx.doi.org/10.3386/w14180